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Political connections and access to bond capital: Reputation or collusion?

POLITICAL CONNECTIONS AND ACCESS TO BOND CAPITAL:
REPUTATION OR COLLUSION?
by
Fei Du
A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(BUSINESS ADMINISTRATION)
May 2011
Copyright 2011 Fei Du

This study addresses how political connections influence a firm’s access to bond capital using a database of 1672 new bond issuances in China from 2001 to 2009. In this context, firm political connections are measured using a score based on the highest bureaucratic position held by a firm executive, with the highest level of political connections attributed to those who have held top positions in the central government, an intermediate level attributed to those in provincial and municipal governments, and the lowest level attributed to those who have not held any government position. Results suggest that firm political connections are positively associated with debt offering amounts and issuer credit ratings, but only in the subsample of firms that have poor information environments, such as non-publicly listed firms and non-Beijing headquartered firms, thus lending support to the argument that political connections contribute to firm reputation. The role of political connections in providing preferential access to debt is relevant to both state-owned enterprises and privately held firms. In addition, issuing firm political connections and bank underwriter political connections serve as alternative mechanisms when explaining the variation of offering amounts and issuer credit rating.

POLITICAL CONNECTIONS AND ACCESS TO BOND CAPITAL:
REPUTATION OR COLLUSION?
by
Fei Du
A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(BUSINESS ADMINISTRATION)
May 2011
Copyright 2011 Fei Du